The Wrong Guy
I think I agree with Daniel gross of Slate Magazine: Why Congress’ confrontation with AIG’s CEO was a failure.
Congressional grandstanding has only added to the fury surrounding AIG. Death threats to current AIG traders have become commonplace and even their kids are being harassed. None of the histrionics is getting us anywhere. Instead it is making it more and more difficult for Obama to contemplate asking for any further bailout funds. Let’s hope we don’t need them.
Looking through the Gross article list of more appropriate targets of enquiry there are a few obvious names: Cassano, the former head of the Financial products Division and the person most responsible for its activities. The notorious Hank Greenberg, former CEO of the entire AIG organization would also be a prime candidate.
But we already know from prior experience that those two are sleaze personified. While we might find something out we most likely wouldn’t be surprised.
Funnily enough the person I want to hear from most is Harvard professor: Martin Feldstein. He sat on the AIG board of directors throughout the years it was accumulating its ridiculous derivatives portfolio. He has a reputation as a strong analyst. Heck he teaches economics at Harvard so I assume he’s fairly bright. And as Gross points out Feldstein invented Reaganomics, the version of standard economic theory that underpinned the laissez faire approach of the last three decades. In many ways the AIG fiasco is a product of Feldstein’s thinking. He apparently earned $236,635 in director’s fees in 2007, so I assume he attended all the meetings. What did he think was going on? What analysis did he ask for? What penetrating questions did he ask?
I have said repeatedly that this crisis is a deeply rooted one. We can, and should, berate and denigrate the fools who sat at the desks and manned the phones executing these failed and massively costly transactions. But they did not act in a vacuum. They were enabled by a whole system of supporting actors: the accountants who looked the other way; rating agencies who had a hand in the till; and Harvard professors who thought up the theories that led us down this dreadful path.
A proper enquiry would cover all aspects of the disaster. Not just the fairly trivial matter of the bonuses being paid to the losers who booked the business.
Follow the path back. There are reputations that need reevaluating. There are three or four Nobel Prizes that should be handed back.
If we want to learn truly what went wrong we must stop thinking that this was the result of a few rogue traders out to make a fortune. It was the result of a complete world view. Once we surface and eliminate that we can be more assured that we will avoid a repeat.
